Hedleyhope lies in the valley of the Dearness, not far from Tow Law. The small settlement traditionally looked towards the larger village of Satley, which itself was part of the parish of Lanchester until the mid-19th century. The name of the village comes from the Old English word 'hedley' or 'headlam', which means 'heathery clearing'; 'hope' is an Old English word for valley, so the place name means literally 'valley of the heathery clearing'. It was first recorded in the Boldon Book in 1183. The small hamlets of the Low and High Hedleyhope are probably the site of the medieval village, though a geophysical survey at High Hedleyhope did not find any archaeological remains.

This area long remained an agricultural area, and Heslett House is a ruined 18th century farm. However, in the 19th century the area began to become increasingly industrialised. A colliery was established at Hedleyhope and East Hedleyhope Colliery forms a village nearby. Hedleyhill is another colliery village to the north-east of the area. Much of the coal from mines was turned into coke in local coke ovens, and then used for iron smelting in the nearby furnaces of Tow Law.

A timber building now used as a vehicle repair garage at the western edge of the village was once the village Methodist Chapel and is known to have contained a memorial reredos screen dedicated to those of the village who served in the First World War. The present location of the screen is unknown but a thin metal plaque detailing the dedication was removed from the garage and relocated to the East Hedleyhope village hall in 2006.